Behavioral Economics: Menu Incentives
In economics, sometimes psychology comes in handy…
If you were creating a wine list for a restaurant, which order would you select:
- Alphabetize everything.
- By price, start with the cheapest bottles.
- By price, start with the most expensive bottles.
- Group by wine type, and then select, from above, one of the first 3 choices.
If psychologists are right, first you should diminish our choices by grouping items. But not too much. Too many items and we might select none of them. Too few and we are dissatisfied. Recent research indicates that at fast food establishments we like 6 items in each category (chicken dishes, pasta, starters…) while in finer restaurants, we prefer selecting among 10 entres.
Next, a reference point is important. Where you start determines how you assess the subsequent selection. One analysis of a menu (below) at Balthazar, a NYC restaurant, explained that they listed a $155 seafood platter at the top right hand side and a $100 platter next to it to create a reference point or an “anchor.” Seen next to the $155 item, people happily select the $100 platter because it appears more reasonably priced. So, for the wine list, place the most expensive bottle first.
Finally, another study indicated background classical music can make a difference. In upscale restaurants, the music seemed to influence more expensive wine purchases. French music even appeared to generate a preference for French wine. Add in slow music and a hint of lavender and people linger more.
Fundamentally, when designing a menu, restauranteurs hope to attract us to their most profitable items, their “stars” and steer us away from popular items that are unprofitable, their “plow horses.” On the Balthazar menu below, their “stars” like the seafood platters and shrimp cocktail initially attract us. By contrast, I suspect they do not want us to order items at the bottom in their “menu Siberia.”
In the menu pdf, here, prices are easier to read than below.
You can see why, in 2002, Princeton psychology professor emeritus Daniel Kahneman won the Nobel Prize in economics (actually called the Sveriges Riksbank–Sweden’s central bank– Prize in Economic Sciences in honor of Alfred Nobel). I recommend his most recent book, Thinking Fast and Slow, as the perfect example of how behavioral economics is the intersection of psychology and economics.